12/10/2001 @ 12:00AM

Dog-and-Pony Show

It won’t be good enough for Jeff Kwatinetz to be the next Mike Ovitz. He wants to bethe next AOL Time Warner.

In all the buzz about Michael Ovitz’s most recent downfall and the collapse of his once-grandiose scheme to reinvent Hollywood (again), there has been scant mention of Jeffrey Kwatinetz.

That would probably suit Kwatinetz just fine. Unlike most Hollywood megalomaniacs, Kwatinetz, 36, prefers to remain under the radar. You won’t find him sitting courtside like Ovitz at Los Angeles Lakers games or mugging for the paparazzi.

But if Kwatinetz succeeds in his behind-the-scenes effort to take over what’s left of Ovitz’s remaining collection of entertainment management companies, it’s a safe bet that Kwatinetz will attract the media attention that he so loathes.

Though Kwatinetz is far from completing a deal with Ovitz, the fact that Ovitz is even negotiating with Kwatinetz is a measure of the power that Kwatinetz has quickly accumulated. After cofounding his talent management agency in 1997 out of his Malibu bedroom, the company, ominously named The Firm, now represents stars like the Backstreet Boys, Korn, Limp Bizkit, the Dixie Chicks and Pamela Anderson. By The Firm’s own estimates, its stable of actors and musicians last year collectively generated more than $1.5 billion in business. These Beverly Hills, Calif. talent scouts grandly value themselves at $250 million, six times this year’s projected revenue.

Kwatinetz, a graduate of Harvard Law School, didn’t get where he is by hiding his ambitions. “Jeff always says we either become a Time Warner or we completely fail,” says David Baram, The Firm’s president.

For now at least, Kwatinetz’s empire outside of entertainment consists mostly of an odd collection of cats and dogs. Backed by financial partners who include Gateway’s Theodore Waitt, he recently ponied up an undisclosed amount for the near-defunct Pony sneaker brand, with the intention of having his hip clients appear in the shoes.

Following that deal, he took a 50% stake in the marketing rights to Build-A-Bear Workshop, a mall-based chain with sales of $158 million that lets kids make their own stuffed animals–and then shakes the stuffing out of their parents’ wallets with an endless supply of accessories. Plans are for The Firm to develop a cartoon series and plaster the bears on calendars and greeting cards. Kwatinetz also has a deal to merchandise Arthur, the cartoon aardvark.

But when it comes to negotiating tactics, Kwatinetz is anything but a teddy bear. To get out of his employment contract with the former Gallin/Morey management agency in 1997, he filed a lawsuit accusing partner Sandy Gallin of, among other things, asking employees to “find young men with whom Gallin could satisfy his sexual desires.” Gallin denied the charges and the suit was quietly settled.

Once out on their own, Kwatinetz and cofounder Michael Green, another former Gallin manager who represented trash-talking comedian Martin Lawrence, quickly established a reputation for playing hardball with record labels.

Kwatinetz met his match last year in Robert Sillerman, the hard-charging founder of Clear Channel Communications’ SFX division, who offered to take over The Firm in a friendly deal that valued the company at $200 million. But the deal collapsed amid finger-pointing and a lawsuit that was eventually settled.